Life insurance is regulated state-by-state. In New York, the laws have always been a bit more tough. In fact, just a few years ago, pricing finally came down in that state, whereas previously people were paying twice as much in New York as in other states.

In the past, an existing life insurance policy could be replaced without consumers having enough time or opportunity to understand what they were giving up and what the new policy meant. So states began requiring that the insurance carrier being replaced be given notice and time to provide information so the old and new policies could be compared.

Regulation 60 requires two separate interactions with a customer before you can replace your current life insurance policy in the state of NY. In step one, the customer is must complete a Client Authorization form to allow the firm to collect information about the customer’s existing life insurance policy or annuity contract, so that the customer will be able to make a meaningful comparison. In step two, the customer must be provided with a Disclosure Statement setting forth information comparing the old and new life insurance policies or annuity contracts, including the primary reason(s) for recommending the new policy or contract and the reason(s) why the existing policy or contract can no longer meet the applicant’s objectives. The customer must sign and date an acknowledgement stating that the customer received and read the completed Disclosure Statement before signing the application for the new annuity contract or life insurance policy.

In most states, that just requires filling out a form, but no major delay, and the agent or insurer can arrange for new temporary coverage in the interim. But New York amended its Regulation 60 in November 1999, and now requires a 26-day waiting period before the application for new insurance can even be filled out, if it’s replacing an older policy. And agents are required to ask if it is.

The result is that a policyholder has to wait a month, even if the new policy would be cheaper and would carry a higher face value, and even if it’s one term policy replacing another. In my opinion, it’s absurd! Who is helped by the 26 day waiting period?